Survey: US services sector expanded at faster pace in August

Friday, September 6, 2019, Vol. 43, No. 36

WASHINGTON (AP) — U.S. services expanded at a stronger pace in August, driven by an uptick in business activity and new orders.

The Institute for Supply Management, an association of purchasing managers, said Thursday that its non-manufacturing index rose to 56.4 from 53.7 in July after two months of cooler growth. Readings above 50 signal growth, and the US services sector has been expanding for 115 months.

Services make up the bulk of US economic activity, so the results are a reassuring signal of continued economic strength.

While services companies surveyed express their concern over tariffs and geopolitical uncertainty, they appear so far to have avoided the challenges faced by the manufacturing sector. The ISM manufacturing index released Tuesday reported the sector shrinking for the first time in three years.

Paul Ashworth, chief economist at Capital Economics said the report was a reminder that "the US economy is hanging in there, even though the manufacturing sector specifically is in recession."

The index's measures of business activity and new orders drove the rebound, climbing by 8.4 and 6.2 percentage points. Hiring activity fell by 3.1 points. This prompted some economists to compare the measure with a private survey released by payroll processor ADP, which reported Thursday that U.S. businesses added a healthy 195,000 jobs in August.

"Employment decelerated modestly and was its lowest level since March '17, countering today's stronger ADP report," an analysis distributed by Contingent Macro Research said.

Slower hiring growth could also simply reflect seasonal changes, according to Anthony Nieves, the Chair of the ISM Non-Manufacturing Business Survey Committee.

"Overall, you see the employment typically pick up in the fall," Nieves said.